Mortgage 5 x Salary before of after tax?

Calum1990

We were offered 180k, so set our budgets at 110-130k used with min 10% dep and 160-170k newbuild with 5% dep.

Knowing my mrs though... these are likely to be flexible!!!

Also we feel ok with these figures as my apprenticeship finnishes in august with a pretty decent wage rise as well as the AIP not including overtime and bonus which is pretty much guarenteed. So we dont mind going close to the AIP

icicat

Thats odd as it seems they lend you 4-5 x of what you don't actually earn? I earn around 50k a year so yhey will lend me based on that? As I actually take home 35k.

Calum1990

its just a guide then they get a more detailed offer later

icicat

My mortgage adviser said 5 x over 25 years. Maybe he is good at negotiating that

missis_amber

icicat wrote: »

My mortgage adviser said 5 x over 25 years. Maybe he is good at negotiating that

I suppose. I'm not as clued up as others on this site but if a lender offered me x5 my salary I would really question my own ability to pay it back every month. My current mortgage is x3 my salary and even that's enough.

Mortgage_Mark_2

icicat wrote: »

My mortgage adviser said 5 x over 25 years. Maybe he is good at negotiating that

You don't negotiate with banks. Self employed sole trader applicants are often assessed using net profit, too.

Malmo

ITT (In This Thread): some forum members with a misconception that lenders still apply loan to income ratios to lend. At best, the ratio is simply a very rough guide that a consumer can comprehend easily, nothing more. What the lender wants to know is how stretched you will be based on credit commitments that will remain after completion, outgoings (usually ONS average figures) and other commitments like childcare, maintenance, ground rent & service charges (if applicable) and your case will be stress tested at much higher interest rates to ensure future rate rises can be absorbed by what you have left. The ratios are maximum lender limits depending on the case, internal policy and regulatory requirements. It doesn't mean consumers can have the maximum.

kingstreet

A typical lender affordability calculator calculates the cost of a mortgage using a set rate of about 6%. The cost is also determined by the term you select, of course.

Against that, it works out from certain assumptions and ONS stats what your normal household expenses are for a given income.

It then takes into account personal but mandatory costs, such as maintenance, childcare, ground rent & service charges, credit costs, dependents etc to work out how much you could spend on mortgage payments.

Then, the Treasury limits what a lender can lend on higher LTVs so you may find at the end of all that, because you want a 90%+ mortgage, the overall LTI caps out at perhaps 4.5 x gross annual income.

missis_amber

When I got a mortgage out five years ago it was straightforward. I applied for a mortgage at the end of last year and they wanted to know everything - how much childcare I pay, if I receive maintenance, what my tax credit payments are, how much I pay for subscriptions etc.

Malmo

missis_amber wrote: »

When I got a mortgage out five years ago it was straightforward. I applied for a mortgage at the end of last year and they wanted to know everything - how much childcare I pay, if I receive maintenance, what my tax credit payments are, how much I pay for subscriptions etc.

Your most recent experience is an outcome of the Mortgage Market Review (MMR) and EU Mortgage Credit Directive.